Three Sides to Every Argument

27-08-2013

The Tampa Bay Times recently ran a story highlighting the 50 worst charities in America. These organizations pay large salaries to their executives, huge amounts to professional fundraisers, and an incredibly small percentage of their revenue (if any) to actual programs, goods or services.

In the article, the Tampa Bay Times refers to a percentage of 35% as the maximum cost of fundraising as a percentage of income. Most of the charities listed on the Top 50 Worst have much higher fundraising costs.

The article created a bit of a firestorm among nonprofit advocacy groups. Three of the largest, Guidestar, BBB Wise Giving Alliance, and Charity Navigator, came together to start a campaign - the Overhead Myth. In the campaign, they stress that the overhead ratio should not be the only measure of a charity's performance. Rather, donors should look at other factors, including transparency, governance, leadership, and results.

No one is arguing that the charities named by the Tampa Bay Times are not among the worst, but advocacy groups and direct marketing professionals stress that acquiring new donors is expensive, and it is also the only way for nonprofits to grow. Running events and meet-and-greets are fine for acquiring new donors on a small scale, but often direct marketing by paid solicitors is the only way for charities to expand their donor base and increase their long-term capacity.

To illustrate the return on a direct marketing investment, here is an opinion piece explaining how a $7 million charity invested $10 million and grew to $60 million over a 13-year period.

In the middle somewhere lies the ideal world - charities that are willing to make an investment to grow, and donors who understand that a charity with a year or two of "excessive" fundraising expenses is not wasting their money.